Oil Retreats on Truce Optimism
by Bloomberg | Will Kubzansky, Grant Smith
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas
Oil prices fell as traders bet the US and Iran are nearing a deal.
Oil declined on hopes that the US and Iran are inching closer to a peace deal after a conditional ceasefire between Israel and Lebanon, even as the truce was marred by ongoing clashes.
West Texas Intermediate futures fell more than 3% to settle above $93 a barrel, snapping three days of gains. The ceasefire between Israel and Lebanon announced Wednesday could meet one of Tehran’s key bargaining conditions, easing the way to a pact between the US and Iran.
Washington and Tehran have sketched out a framework to extend their truce by two months and reopen the Strait of Hormuz. But negotiations are stalling and sporadic fighting has resumed.
Iran said there had been no recent progress in talks with the US, and the Iran-backed Hezbollah militia rejected the US-brokered truce in Lebanon. Meanwhile, Hormuz, a critical chokepoint for nearly a quarter of the world’s seaborne oil, remains effectively closed. Those hurdles didn’t keep prices from slipping, however.
“I think the market is generally hooked on the idea that we’re getting very close to a deal,” said Gregory Brew, geopolitical analyst at the Eurasia Group.
Futures accelerated their declines on Thursday morning after Trump posted on social media that talks were in the final stage. Trump said last week that he would shortly make a “final determination” on a truce.
“Traders are almost completely on the sidelines as evidenced by open interest and volumes dropping to multi-year lows,” said Joe DeLaura, global energy strategist at Rabobank.
Oil prices gained earlier this week on signs that global supply buffers are shrinking. US figures on Wednesday showed crude inventories at Cushing, Oklahoma – the delivery hub for West Texas Intermediate crude – fell for a sixth straight week, nearing minimum operating levels.
Even if an Israel-Lebanon ceasefire caps some near-term price gains, risks remain elevated while the strait stays cut off. Brent could climb as high as $130 a barrel in the fourth quarter as inventories tighten, said Robert Rennie, head of commodity research at Westpac Banking Corp.
“The market is asleep at the wheel, even as we drive rapidly toward aggressive tightening in crude and product markets,” Rennie said.
President Trump on Wednesday said the strait would reopen “immediately” if Iran signs a memorandum of understanding to halt hostilities, adding that some areas in the waterway would need to be cleared of mines. He downplayed the threat those pose to commercial shipping.
The strait remains the market’s central focus. Roughly a fifth of global crude supply typically passed through the chokepoint prior to the war, and its near-closure has pushed energy prices higher, raising concerns about a spike in inflation and slowdown in economic growth.
Oil Prices
- WTI for July delivery fell 3.1% to settle at $93.04 a barrel.
- Brent for August dropped 2.8% to settle at $95.03 a barrel.
by Bloomberg | Will Kubzansky, Grant Smith
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas